ACCC gives green light to NAB’s Citi acquisition

The National Australia Bank is set to become the country’s second largest credit card provider, after the consumer watchdog waved through its $1.2 billion planned acquisition of Citi’s retail banking business.

NAB announced in August it had reached a deal to buy Citi’s Australian consumer business, which owns 9 per cent of the country’s credit cards, has a small mortgage book and around $9 billion in deposits. While the deal is subject to a number of regulatory approvals, the Australian Competition and Consumer Commission announced on Thursday it will not oppose the acquisition – a key regulatory hurdle to finalising the deal.

ACCC chair Rod Sims said NAB’s acquisition of Citi’s retail banking business will not impact competition.Credit:Fairfax Media

The takeover will almost double NAB’s market share in the credit card market, from 12 per cent to 21 per cent, making it the second largest provider behind the Commonwealth Bank which controls 23 per cent of the market, Westpac which controls 18 per cent and ANZ, which controls 15 per cent.

Citi is a major provider of white-labelled credit cards to a range of large non-bank companies including Qantas, Coles, Emirates and Kogan, which competition tsar Rod Sims said he was initially concerned by. However, the ACCC has now completed a three-month review of the deal, in which it interviewed around 20 market participants. Mr Sims said he is satisfied there will be no impact to competition.

“I certainly thought there was an issue when it walked through the door, I expressed concerns at the beginning,” Mr Sims said. “But the beauty of doing the analysis and the work, when you find out more information, you change your mind. I could look anyone in the eye and say this one is fine. We did a lot of work, having done that work, in our view there’s nothing to see here.”

Mr Sims said non-bank companies regularly review whether it is cheaper to self-supply credit cards rather than using Citi’s white-labelled service, adding if NAB hiked rates these companies would simply seek a better deal elsewhere. “In the end, that was the critical issue,” he said. “The non-banks who use white-label cards were not complaining.”

The deal comes as the major banks face increasing pressure from the emergence of fintechs and buy-now-pay-later (BNPL) firms, which Mr Sims said formed the backdrop to the ACCC’s review but did not inform the decision.

“Buy-now-pay-later has come along very quickly, and grown very quickly. It’s coming from nothing to something very big, very quickly. What comes up quickly can go down quickly,” Mr Sims said. “We did think about that. But in the end that didn’t form part of the reason.”

Morningstar analyst Nathan Zaia said demand for credit cards was on the decline but the Citi acquisition will put NAB in a prime position to respond to shifting consumer demand. “The banks will adapt their offerings to what the customers want. If it is more BNPL, no fee cards, the banks will still have a role to play in that credit card space, it might just not be the traditional card that we’re used to.”

If the deal is approved, around 800 Citi staff will join NAB, which Mr Zaia said creates additional benefits. “Citi’s focus was on the personal lending space, they might bring in new insights or process improvements that you might get when you bring in another business.”

NAB chief executive Ross McEwan welcomed the ACCC’s decision, as the bank works its way through the regulatory approval process. “The planned acquisition is an exciting opportunity for us to further build market leading customer experiences in what is a very competitive market,” Mr McEwan said.

NAB shares dipped by 0.91 per cent in early trade to $28.19 per share.

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